The Top 10 Most Innovative Companies in China

For launching low-cost, high-quality smart TVs and -phones to steal market share from industry stalwarts. At just three years old, Xiaomi is a neophyte no more. The consumer-electronics company released four new smartphones last year and sold almost 19 million of them—sales were up more than 150% from 2012—staking out a significant piece of the Chinese market with its low-cost, feature-rich devices. Xiaomi’s founder, Lei Jun, takes a radically new approach to the smartphone business model: Instead of brandishing phones’ high-cost luxury appeal like that Cupertino company, Jun sells them in buzz-generating flash sales at razor-thin margins, then takes advantage of revenue streams provided by software. Last year, Xiaomi’s earnings hit $5.2 billion as users downloaded more than 1 billion apps. Read more >>

For making DNA sequencing mass-market. By investing in more cutting-edge genome-sequencing hardware and training more analysts to make sense of reams of data output than any research institution or university in the world, BGI has turned itself into a go-to destination for global scientists seeking to collaborate on ambitious projects to unlock the mysteries of plant, animal, and human DNA. The Shenzhen, China–based institute is now the most prolific sequencer of human genomes, using technological advances to vastly reduce the cost of sequencing complete genomes, from $3 billion in 2003 to mere thousands of dollars today. Its goal is to organize the world’s biological information and make it useful and accessible to all—like a biological Google. Last year, BGI acquired California-based Complete Genomics, a leading manufacturer of genome–sequencing machines, for $118 million, giving it even more firepower. Read more >>

For greeting its booming middle and upper classes with distinctly native offerings. At a time when President Xi Jinping’s austerity has hurt the allure and sales of foreign prestige brands like Louis Vuitton, domestic Chinese brands have quickly risen to take advantage of a shift in the luxury market. This includes seeking out unique experiences, such as retracing ancient trade routes on the Ancient Tea and Horse Caravan Road with boutique travel firm Wild China, and expressing one’s personal flair with Mary Ching’s opulent heels and distinctive slippers. In addition to channeling local tastes, Chinese fashion brands like Nisiss have been leaders in staking out turf in China’s "second-tier cities," where McKinsey estimates 45% of the country’s middle-class and high-income earners will live by 2022.

For letting its 80,000 employees self-organize and oust ineffective leaders—a bold approach to innovating the fridge and microwave business. After he was brought in to save the money-losing Qingdao Refrigerator unit in 1984, legendary CEO Zhang Ruimin famously handed workers sledgehammers and told them to smash defective units. Thirty years later, he’s launching a management revolution at the world’s leading home appliance brand, in effect by smashing middle management. In a country where seniority often trumps creativity and performance in business hierarchies, Haier has created a unique internal talent pool and bidding system, allowing self-organizing internal units to present and bid on project proposals—and to vote out incompetent leaders. Taking risks has paid off: The company’s revenue grew to nearly $30 billion in 2013.

For pummeling the Chinese social-networking competition and sending chills through Silicon Valley with a 10-terabyte storage offer. In January, the official China Internet Network Information Center reported that users of the once-dominant Sina Weibo declined by 9% last year, due in part to the rise of Tencent Weixin, which now has more than 400 million registered users. The ubiquitous messaging app, which has also benefited from the absence of Facebook (still blocked in China), is used for sharing photos, discussing politics, and creating viral marketing campaigns. It’s also the first Chinese social-media app to successfully go beyond the Great Firewall (aka outside China’s borders). As of last August, Weixin, known abroad as WeChat, was the fifth-most-used smartphone app worldwide, and its recent offer of 10 TB of free cloud storage to foreign users is sure to further boost its international appeal.

For making wearable tech closer to vogue with a ring that syncs to phones and shares contacts via fist bump. Last summer, wearable-tech pioneer Geak launched both its Android-powered smartwatch and novel Geak ring, which might even make Bilbo Baggins envious. The one ring can rule them all—smart devices, that is. The near field communication-enabled accessory stores select information about your identity, which can then be used to unlock mobile devices and share electronic contact details with another ring wearer. Instead of typing in your password, just hold your phone in the same hand the ring is on. The "precious" costs just $30.

For clearing the air in Beijing homes with the app-controlled EcoTower. Like California-based Nest, Beijing-based Phantom sees a future in which consumers manage home appliances from their smartphones. But the startup, founded by graduates of Tsinghua University (considered the MIT of China), offers a focused product line and affordable price points designed specifically for Chinese citizens. Its two main products are app-controlled, energy-efficient lightbulbs ($21 each) and smart EcoTowers ($43). The latter gathers information about home air quality: temperature, moisture, and, especially useful for residents of smoggy Beijing, pollution levels. According to the newly released Environmental Performance Index, compiled by scientists at Yale and Columbia, China ranks first in the world in terms of average exposure to PM 2.5—fine particulate pollution that is dangerous for human health.

For moving from search to smart cameras, giving users their own Internet-enabled monitoring devices. The powerhouse search company—sometimes called the Google of China—has begun to move from software into hardware under its new brand Xiaodu. After launching a router and portable projector, Baidu inched into slightly more unconventional territory last year when it announced a Wi-Fi–controlled camera called Xiaodu iErmu, which records streaming video and stores it in the cloud. (Possible uses could include monitoring children, aging parents, or pets from afar.) On the software front, Baidu also made waves when it launched a translation app that includes speech and text recognition abilities for English, Mandarin, Cantonese, and a growing catalog of other languages.

For letting anyone become a star in the world’s most-crowded country. As if American Idol didn’t have enough problems, it now has to deal with some (online) Chinese competition. YY started its video-based network in 2005 as a hub for hard-core gamers, but it found other users—including karaoke enthusiasts. Now a majority of YY-ers log on to sing for thousands of viewers, who gift the "vocalists" with virtual goods they can exchange for cash, such as 82-cent roses and $1,000 Lamborghinis. (YY generally takes a 60% cut.) Amazingly, this—along with deals from real-life TV competitions—accounts for nearly half of its $198 million in revenue.

For tapping into user demand for faster typing. Shanghai-based CooTek’s widely used and free-to-download applications for typing quicker on smartphones—including its TouchPal X Keyboard—are already used by 100 million people worldwide on Android and Windows 8 operating systems. Founded in 2008, the software company went upscale this year by powering the multimedia systems of the new Mercedes-Benz S-Class luxury sedan. The company has also partnered with Sony, which uses TouchPal Keyboard in several of its leading digital cameras, including the NEX-5R, NEX-5T, and NEX-6 models. As CEO Michael Wong wrote on the company’s Facebook page earlier this year, "Typing is like breathing—you do it every day." And it should be effortless.